Financial Assets and Money- Macro 4.1 and 4.3 #Finance

hey internet this is jacob clifford let’s jump into macroeconomics unit 4 and talk about financial Assets this is you this is you with a lot of money this is you wondering what you should do with all of it and this is me helping you figure it out back in unit 2 you

learned about the circular flow model gdp and producing goods and services but here in unit 4 we’re talking about the financial sector which involves lenders borrowers and money when you think about money you probably think about the cash that’s in your wallet that’s issued by the

government but economists argue that money could be anything that’s generally accepted for goods and services this is a shrewd buck when you have done something good you will receive one schrutebuck so for economist money is anything that serves three purposes or has three functions medium of

exchange unit of account and a store of value that is something that can be used by goods and services something that you use to measure the relative value of things and something that allows you to hold your purchasing power and use it in the future so money doesn’t need to be issued by the

government it just needs to be something that we all agree has value very good you have earned one shrewd buck i don’t want it the classic example of this are the large stone discs that were used for money on yap island in micronesia what’s that the first time if they wanted to pay

someone in their village for a good or for their daughter’s dowry they just said okay now you own this stone disk and oftentimes they didn’t even move them now there’s a couple terms here that you might see on a quiz or a test commodity money and fiat money commodity money like

gold has intrinsic value and you can do other things with it other than use it for money and its value comes from the fact that it’s shiny and pretty and useful fiat money like the cash that’s in your wallet has no other purposes and its only value comes from the fact that we all kind

of agree it’s valuable don’t you want to earn fruit bucks but money doesn’t even need to be a physical tangible object in fact most of our money is just ones and zeros in computers at banks that’s because when economists talk about money they talk about cash and currency and

circulation and also checkable deposits this is all the money that’s out there in checking accounts the reason why they count this in the money supply is because you can go buy a pizza with cash but you can also write a check and that’s a medium of exchange and that explains how

economists classify money m1 money is currency in circulation checkable deposits which is checking accounts and traveler’s checks m2 is near monies it includes everything in m1 plus money and Savings accounts cds and Money Market funds the point is this is

all money because it has high Liquidity it can be quickly and easily convert into something that can be used as a medium exchange by the way if you’re asking yourself when are we going to learn about the relative value of different currencies from different countries well

that’s called foreign exchange we’ll learn it in unit six i’ll give you a billion stanley nickels if you never talk to me again what’s the ratio of stanley nichols to shrewd bucks the same as the ratio of unicorns to leprechauns so the cash in your pocket and the funds in

your checking account are money but other Assets like Real Estate Bonds and stocks that’s not money these Assets have low Liquidity it takes a lot of time to convert them to something they can use to go buy a

pizza but the reason you might want to own stocks and Bonds as opposed to keeping all your money in your checking account is because these earn more in the future for example if you bought tesla stock in the beginning of 2020 you would have paid about 86 bucks at the end of 2020 it

was over 700 now that’s an outlier stocks usually don’t go up that fast in fact sometimes they go down if you bought stock in carnival cruise lines during the same period of time your asset would have gone from 50 down to less than 20. but the point is these are both examples of stock

or equities which represents ownership in a company and that’s different than Bonds bond james bond Bonds are also called Securities and they’re just ious issued by corporations and the government they usually give you less risk and

less returns than stocks unlike stocks when you own a bond you don’t own any of the company you’re just going to get paid back at a set interest rate you’re the lender and the company or the government is the borrower so when you buy a bond you give them your money and

they’re agreeing to pay you a set predetermined interest rate in the future and in addition to the Stock Market there’s also a bond market we can go buy previously issued Bonds so instead of somebody else getting the interest i can buy the bond and

i’ll get paid the interest that means there’s a negative relationship between Interest Rates and bond prices assume that there’s a bunch of previously issued Bonds at three percent and Interest Rates go up to ten percent well

i’m gonna want that i’m not going to want those previously issued Bonds i’d rather have the higher returns so the amount that i’d be willing to pay for those previously issued Bonds would go down but if the interest rate for new

Bonds fell to one percent well i’d rather have the three percent Bonds so the price would go up for those Bonds the point is for your test and your class remember a negative relationship between Interest Rates and bond prices

so going back to the beginning of this CashNews.co if you get a lot of money what should you do keep it as cash stocks Bonds Real Estate well that’s not something you’re really going to learn in an economics class that’s more personal

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance if you really want to learn the details and take a none;">Finance class or a business class because economics is more general but it lays the foundation of all of it so you’re still going to need it ooh economics very very interesting now to help you remember the key concepts in this CashNews.co especially the three functions of

money and bond prices i’ve got this it’s a stone disk from yep island and on the back side i have Interest Rates and bond prices just remember they’re inversely related if Interest Rates go up bond prices are going to fall but don’t go

anywhere there’s still two things we have to do first if you like this CashNews.co then you’re going to love the ultimate review packet include study guides summary CashNews.cos practice sheets practice multiple choice questions practice exams everything you need again and your class

and rock your exams plus it’s a great way of saying hey thanks clifford for making all these free CashNews.cos on youtube and the second thing it’s time for a pop quiz no no no no no the questions won’t be on the screen for very long so pause the CashNews.co see how you do and

look at the answers in the first comment below thank you so much for watching my CashNews.cos until next time you